Latest news with #businessloans
Yahoo
23-07-2025
- Business
- Yahoo
What is a merchant cash advance?
Key takeaways A merchant cash advance forwards cash against future sales. MCAs have aggressive repayments that disrupt profitability until it's repaid. Borrowing fees are high with rates of 50 percent to 100 percent or more. According to the 2024 Small Business Credit Survey, business loans and lines of credit are the most commonly sought types of financing by small business owners. For businesses with steady credit or debit card sales, understanding what a merchant cash advance is may reveal a faster, more flexible funding option. A merchant cash advance (MCA) provides a lump sum of capital in exchange for a percentage of future card-based sales, offering quick access to funds with fewer documentation and eligibility requirements than traditional loans. Merchant cash advance loans are also one of the most accessible financing options — 58 percent of applicants received at least partial funding, and 33 percent were fully funded. Although MCAs are easy to get, they are not legally classified as loans, making them exempt from state lending laws, which could mean significantly higher costs. How a merchant cash advance works A merchant cash advance loan forwards payment to your business against future credit or debit card sales. It's typically used to increase working capital for businesses and cover cash flow gaps. The advance works like this: Your business receives the cash. You and the financing company agree to the amount your business needs. The funds are dropped in your business bank account. The financing company charges fees. Instead of an interest rate, MCAs typically charge a factor rate that gets multiplied by the entire loan amount. For example, a $100,000 advance with a factor rate of 1.4 would cost a total of $140,000. Your business repays based on future sales. Repayments are often daily, though some MCAs offer weekly payments. The advance is repaid once you pay the borrowed amount plus the factor rate and any other fees. Lenders that do merchant cash advances Only some lenders offer merchant cash advances, so it's important to compare providers to find the most favorable terms. These lenders offer the best merchant cash advances available: Credibly Lendio PayPal SBG Funding Uncapped Pros and cons of MCAs Pros Approval rates as high as 91 percent High chance of approval for bad credit borrowers Funding within 48 hours Does not require collateral Cons Requires daily or weekly repayments Factor rate fees often cost more and have shorter repayment terms than conventional loans Doesn't help build credit No cap on interest rates, as MCAs are not subject to state usury laws How to refinance merchant cash advances Some MCAs allow you to refinance your cash advance if you need to extend the repayments. The trouble with refinancing is that most MCAs still require you to repay the total borrowing cost from the first advance. If you refinance, the new advance may calculate interest on the first advance's borrowed amount plus fees. You'll then be paying interest on interest, which can trap you in a cycle of debt until you repay the advance in full. How merchant cash advance repayment works Merchant cash advances come with two options for repayment terms: a percentage of your credit card sales or a fixed payment. Most MCAs also keep repayment periods short, typically 18 months or less, depending on the lender. Percentage of credit and debit card sales Most MCAs structure repayments as a percentage of your credit or debit card sales, also known as a holdback. Holdbacks range from 10 percent to 20 percent of sales revenue. Because you're paying a percentage, the exact amount paid to the financing company varies with each repayment. You can estimate your repayment term based on how much you make in sales. The terms may be drawn out if sales dip at any point. Calculating your repayment Let's look at the example of a $100,000 cash advance with a 1.4 factor rate. The total borrowing cost would come to $140,000 ($100,000 x 1.4 = $140,000). If you generate $50,000 in sales each week and pay 20 percent toward the advance, it would take your business 14 months to repay the advance. To calculate the repayment term: Calculate each repayment: $50,000 in weekly sales x .20 (20% holdback) = $10,000 repayment Figure out how long it will take to repay: $140,000 / $10,000 = 14 weeks Fixed withdrawals Some MCAs take fixed withdrawals directly from your business bank account each day or week, similar to a conventional business loan. The fixed amount is calculated from your estimated monthly sales, and you can figure out how long it will take to repay the advance plus borrowing fees. While the repayment term is predictable, you don't have the flexibility to extend it if revenue slows down. Merchant cash advance rates and fees You'll want to take note of the fees listed in the MCA agreement and ask questions if you don't understand the borrowing costs. Merchant cash advance loans subtract these fees upfront. If the MCA charges $1,000 in fees for a $5,000 advance, your business will receive $4,000 in funding. Typical financing fees for MCAs: Factor rates. MCAs may charge factor rates between 1.1 to 1.5, multiplying that rate by the amount you're borrowing. These are typically charged on business loans for riskier borrowers. Origination fee. This fee is charged as a percentage of the borrowed amount and is a common fee for other business loans as well. Underwriting or funding fee. This fee is charged for reviewing the financing application. It may get charged as a percentage of the borrowed amount or a flat fee, depending on the financing company. Administrative fee. This flat fee covers the cost of processing or maintaining the MCA agreement. Factor rate costs Because merchant cash advances charge a factor rate, the cost of borrowing is often higher than other types of business financing, such as a working capital loan. Take the $100,000 cash advance with a factor rate of 1.4 and a 14-month repayment term, for example. If you convert the factor rate into an interest rate, the annual interest rate for the $100,000 advance is 34 percent. By comparison, if you were able to take out a short-term loan for the same amount with a 34 percent APR for one year, you would have more time to pay off your loan. Monthly payments would also be smaller, and you'd pay less in borrowing costs overall. Use a business loan calculator to help you crunch the numbers and see how much more expensive factor rates can be. How to calculate the costs of a merchant cash advance Before taking out a merchant cash advance, it's important to calculate the costs to ensure it's the best fast funding option for your business needs. Let's continue with the example from above and calculate the total cost. When multiplying the $100,000 cash advance by the factor rate of 1.4, you get $140,000, meaning you'll pay $40,000 in fees. Your daily payback amount and time to repay the full amount will vary depending on your sales volume. Let's see how the figures differ for monthly card sales of $50,000, $75,000 and $100,000. $50,000 monthly sales volume $75,000 monthly sales volume $100,000 monthly sales volume Total MCA $140,000 $140,000 $140,000 Monthly payback amount $5,000 $7,500 $10,000 Daily payback amount (30-day month) $166.67 $250.00 $333.33 Effective APR 31.03% 46.54% 62.35% Time for full repayment 840 days or 28 months 560 days or ~18.5 months 421 days or 14 months In this example, a lower sales volume results in a lower payback amount and APR, but it takes longer to repay the debt. Taking your monthly sales volume into consideration and calculating your effective APR can make comparing MCAs to other financing options and their total costs easier. Bottom line Merchant cash advances can help when your business needs cash immediately to cover day-to-day expenses, and nearly any business with card sales can qualify even with bad credit. But its high fees and aggressive repayments may not be ideal for businesses with persistent cash flow problems. If you don't qualify for loans with traditional banks, consider business loans designed for bad credit borrowers, which may offer significantly lower interest rates than MCAs. Frequently asked questions What happens if you default on a merchant cash advance? Merchant cash advances can help businesses having difficulty finding funding, offering the capital needed to cover day-to-day expenses. But if you miss payments and default on the advance, the MCA company can sue you. If it wins in court, it can seize business assets to repay the advance. Can you write off a merchant cash advance? You can typically write off the interest portion of a business loan. While merchant cash advances aren't a loan, you may be able to write off its fees on your annual taxes. Like a business loan write-off, you can't use the advance to invest in business growth. What are some alternatives to merchant cash advances? MCAs can be a good fit for temporary cash flow gaps, but other alternatives may be a less costly solution with longer repayment terms. Here are some alternatives to explore: Term loans Business lines of credit Business credit cards Invoice factoring and financing Business grants What's the difference between a merchant cash advance and a bank loan? Both offer a lump sum of capital, but a merchant cash advance requires repayment based on a percentage of future sales, typically on a daily or weekly basis, which means payments can fluctuate with your card-based sales revenue. A traditional bank loan offers a fixed loan amount with regular installments and a set interest rate over a defined term. MCAs are usually faster and easier to obtain, requiring less documentation, but often come with significantly higher costs than bank loans. Are merchant cash advances illegal? No, merchant cash advances are legal in the United States, but they operate in a legal gray area. They are structured as future receivables purchases instead of loans, so they aren't subject to the same lending laws, including state usury limits. This loophole allows some lenders to charge extremely high fees, making MCAs a costly financing option for many small businesses. Can a merchant cash advance hurt your credit? A merchant cash advance may hurt your credit if it requires a personal guarantee or the lender reports missed payments or defaults to the credit bureaus. Even if not reported, defaulting could lead to collections or legal action, which can negatively affect your credit. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
12-07-2025
- Business
- Yahoo
Where can I get a fast business loan?
Online lenders usually offer the fastest funding for small businesses The best fast lenders should have an easy-to-understand application and funding process Fast loans may come with higher interest rates, more aggressive payment periods or higher credit standards When you need cash quickly, a fast business loan can get you the funding you need as soon as a business day. Keep in mind that while fast business lenders can have a quick turnaround time, they may come with less favorable terms such as higher interest rates, shorter repayment periods or higher lending standards. Here's where to find and the pros and cons to consider for small business lenders. Online lenders offer some of the fastest approval times for business loans. These lenders require minimal documentation and use software to streamline the approval process, sometimes within 48 hours of applying, or even same-day funding. The entire application can be completed online and within minutes, and is often available in all 50 states. On the downside, online loans may have less favorable terms, such as short, aggressive repayment periods, higher interest rates, and less personal customer support compared to traditional banks. Fastest funding option More lenient qualification requirements Use funds for almost any purpose Less favorable loan terms — often only a few months Higher borrowing costs Limited personal interaction and support Financing through online lenders may be best for startups, businesses with limited credit history or business owners with bad credit. Online lenders typically have streamlined application processes and less stringent approval requirements. You could be eligible for some lenders with a minimum credit score of 550, six months in business and annual revenue of at least $50,000. Bankrate insight Other types of fast business lending products to consider are: Business credit cards Business lines of credit Short-term business loans If the majority of your transactions happen via debt or credit cards, then a merchant cash advance (MCA) can get you funding quickly. Like invoice factoring, you can get a cash advance in exchange for future transactions – specifically, future credit and debit card sales. The lender will extend a loan based on your past sale amounts, and thus don't typically have credit requirements, and often carry 90 percent approval rates. However, MCA factor rates and fees tend to be quite high, and repayments are often on a daily or weekly basis. Fast funding No credit requirements Approval rates of up to 90 percent Very high fees Doesn't add to credit history Daily or weekly repayments MCAs work best if you have limited or bad credit and conduct a good chunk of your sales via credit or debt cards, and if you don't otherwise qualify for other loans. Keep in mind that the loan repayment period will be short and aggressive, and that the fees will be much greater than a traditional or online loan. You also risk incurring late fees or penalties if you can't make payments due to slow sales or otherwise. While traditional lenders, banks and credit unions often have a longer underwriting process with stricter loan requirements than online lenders, you may be able to get some loans quickly. PNC Bank, for example, can fund loans in one to five business days. If you're an established customer at the lender and have borrowed from them before, you may be able to get funds more quickly based on customer loyalty and the information they have on hand. Favorable interest rates and terms Face-to-face customer support Able to build business credit Strict documentation requirements Longer application process and time to fund Most require established business history Traditional lenders usually require businesses to be established — often at least two years old — with good or excellent credit and at least $250,000 in annual revenue. If the business has an existing relationship with the lender, such as a business bank account, this can increase the likelihood of approval and speed of funding. You don't necessarily need a fast business loan to get cash quickly. Alternative options include grants, bootstrapping and more. Learn more While you may need fast business funding, taking the time to research the most reputable fast business lender can pay off. After determining which loans and terms best fit your lending needs, you can evaluate each lender by its application process, customer service, underwriting requirements and funding speed. Once you've found the right lender, responsibly managing your fast business loan is key to avoiding default and penalties. The best fast business lenders should have: Good customer reviews on sites like Trustpilot A soft credit check to prequalify and avoid lowering your credit score Competitive interest rates A clear and understandable approval process No fees or other costs hidden in fine print Fast business lender red flags When you need small business funding fast, it could cause you to overlook red flags in a business lender. Consider these warning signs when researching fast business lenders: Requiring an application fee Being pushy through the application process Not showing rates and loan terms upfront Extremely high interest rates or additional fees Making promises the lender can't keep, like guaranteeing approval Bankrate insight SBA loans provided through the Small Business Administration can be a valuable option to consider. These loans cover the costs of operating your business and are available to small businesses that have exhausted other funding options. According to the SBA, about 61,496 7(a) loan applications have been approved in the 2025 fiscal year as of July 2025, and the average loan size was $450,781. Fast small business loans can be a great way to get the financing you need quickly. Since every lender has pros and cons, you'll want to consider each lender's requirements and your business's needs and eligibility. Once you gather any necessary documentation and apply, you could receive funds within one to three days if approved. How fast can you receive a business loan? It's not unusual for online lenders to grant a business loan within a few hours of application submission and funding as soon as 24 to 48 hours after an application has been submitted. Traditional lenders may take a few weeks. Can you get a fast business loan for a startup? Yes, online lenders are known to offer startup business loans. These loans typically fund quickly and have less stringent qualifications and lending requirements. A business line of credit is another quick funding option for startups. Even startups with a minimal credit history may be eligible through online lenders. What is the quickest way to get a business loan? The quickest way to get a business loan is to work with a lender who offers fast business loans. These lenders can typically approve and fund a loan in as little as one to two business days. Online lenders usually offer the fastest lending times. If you prefer to work with a traditional lender, you can speed up the process by knowing the eligibility requirements and having everything you need for the application in advance. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
09-07-2025
- Business
- Yahoo
Pros and cons of working capital loans
Working capital loans offer fast funding and can have relaxed eligibility requirements, but they have small loan amounts and short repayment terms with frequent payments. Interest rates for working capital loans can be higher than other types of loans, and certain loans may use factor rates instead of interest rates. Working capital loans are a type of short-term business loan that can help businesses cover immediate costs like payroll, inventory or rent. Working capital loans help companies borrow money to cover cash shortfalls and pay for everyday expenses like payroll or inventory purchases. The best working capital loans can help your company make ends meet without imposing strict requirements to be eligible for the loan. That said, working capital loans typically come with short repayment terms, like 24 months or less. You might also be stuck with a tight repayment schedule, such as daily or weekly payments. Consider all the pros and cons of working capital loans when comparing loan options to make sure you're making the best decision for your business. Fast funding. May not require collateral. Flexible uses. Relaxed eligibility requirements. Short repayment terms. Frequent payments. Higher costs. Working capital loans have many advantages that make them a popular choice for businesses needing financial flexibility. There are many types of working capital loans, so pros may vary based on what kind you choose. Because working capital loans are intended for paying day-to-day operating expenses, lenders prioritize speed when it comes to approval and funding timelines. This is especially true of online lenders, who can often approve your application within minutes and put money in your company's checking account the next day. Some working capital loans don't require collateral, which eliminates the risk of losing your big assets, and also helps speed up the funding process because you don't have to wait for an appraisal. Working capital loans are designed to boost the working capital needed to cover business expenses or expansions, which means you can use them for nearly any purpose. Some common uses for working capital loans include: Covering day-to-day operational expenses. Purchasing materials or inventory. Purchasing assets that boost business growth. Expanding your business or business acquisition. Most lenders, especially online lenders, will have relaxed eligibility requirements for short-term working capital loans. It's possible for business owners to find working capital loans for startups or bad credit. Utilize business credit cards to build business credit If you have good-to-excellent credit, consider keeping a business credit card on hand to cover working capital needs you can pay off quickly. On top of building business credit, you can avoid interest charges if you keep your balance paid in full each month. The best short-term business loans can help when a business needs quick cash, but they come with some important drawbacks to keep in mind. Working capital loans are intended for short-term use, so lenders expect to be paid back relatively quickly. Expect repayment terms no longer than 24 months. Lenders that offer working capital loans for bad credit may have even shorter repayment periods. Due to shorter repayment terms, many lenders ask for bimonthly, weekly or even daily payments for working capital loans, which can cut into your business's cash flow. Make sure you can afford the payments and payment frequency before you take on a working capital loan. If you're not careful, you could end up defaulting on your loan or falling into a cycle of debt. Because working capital loans have quick approvals and less stringent requirements than other loans, you will likely encounter higher rates and fees than you would with a traditional loan. This adds to the total cost of the loan, and can increase your payment amount. Some lenders may charge factor rates instead of interest rates, which typically convert to higher APRs and can make it difficult to compare options. Convert factor rates into interest rates to understand the true cost of borrowing. Before accepting a loan that uses factor rates, make sure you convert it to interest rates to compare with other loans and better understand how expensive these loans are. Our guide on factor rates will show you how. Working capital loans can help companies facing liquidity issues come up with the funds they need to pay their daily operating costs. Their quick approvals and easy eligibility requirements make them an easy way to borrow money. But relying on them too much can balloon costs and ultimately exacerbate your business's financial woes. Consider whether the pros of working capital loans, like lenient eligibility requirements and fast funding, outweigh the cons, like high interest rates, helping you make the best decision in getting a small business loan. Does the SBA offer working capital loans? Yes, many types of SBA loans can be used for working capital. You can use the organization's SBA 7(a) loan, CAPLine lines of credit, Community Advantage or SBA Express loans to cover working capital needs. What credit score do you need for working capital? Each lender sets its own requirements to qualify for a loan. Typically, online lenders have lower requirements than banks or credit unions, and you can qualify with a credit score of 500 or even lower. A low credit score, however, will mean high borrowing costs. What are the benefits of a working capital loan? Working capital loans help cover short-term borrowing needs. They offer many benefits, including quick approvals and funding, simple loan applications and lower eligibility requirements, than other types of business loans. Sign in to access your portfolio
Yahoo
08-07-2025
- Business
- Yahoo
Ex-broker's $68k fraud of major bank
A former financial broker gained $68,000 in commissions by forging tax accountant letters for people who were not entitled to business loans for cars through a major Aussie bank, a court has been told. Charleen Henegan's conduct was undone by her own hand, after she wrote a letter to Macquarie Bank admitting to creating the letters on 18 occasions, allowing several people to obtain business loans they were not entitled to. Macquarie Bank paid out $729,000 as a result, Brisbane District Court was told. In lieu of a jail term, Henegan walked from court on Tuesday with an 18-month suspended sentence, after pleading guilty to a single charge of fraud - dishonestly inducing a person to act. District Court Judge Deborah Richards noted an irony at the heart of Henegan's offending, in that she committed the offence out of significant 'financial pressure' at the time, yet had paid the 'ultimate price … (of) financial ruin'. 'You've lost your finance brokerage, you won't be licensed again,' Judge Richards said. 'There's been a very heavy financial penalty that you've paid for this offending, for not particularly significant reward.' The court was told Henegan's co-accused was a car dealer who set about obtaining business loans from Macquarie Leasing – a subsidiary of the bank – for his prospective customers. In order to secure the business loans, the co-accused inflated the value of the vehicles through a combination of falsifying tax invoices, winding back odometers and instructing 'customers to create ABN numbers' for their loan applications. Henegan became involved as a passive financial broker for these applications, crown prosecutor Rhys Byrne said. 'As part of a business loan application, Macquarie Leasing usually requires a letter from an accountant to confirm the car was being used for business purposes,' Mr Byrne said. Between December 2018 and April 2019, Henegan forged accountant letters on 18 occasions, falsely asserting customers were entitled to a business loan. Mr Byrne said Henegan received $68,000 in brokerage commission as a result. An investigation began in 2019 over the irregularities. Henegan admitted to Macquarie Leasing in a letter that she had used old account letter templates to forge the documents and that she was under financial pressure at the time, Mr Byrne said. Justice Richards questioned this, saying: 'She could have just said no'. She also noted Henegan was not 'entirely ignorant' of what she was doing, saying police found emails on her computer with customer pay slips, demonstrating they were not self-employed or sole traders. 'There was also an email found on your computer from the car company telling you exactly what these false letters should say … that the vehicles would be used predominantly for business … and the tax was up to date,' Judge Richards said. Henegan's barrister Evan O'Hanlon-Rose said the offending was an 'uncharacteristic aberration' in the life of his otherwise law-abiding client. 'The combination of all that was going on in her life at the time led to an impairment of judgment,' he said. The court was told Henegan's co-accused – who was described as the 'driver' of the offending – was sentenced to two years' jail, suspended after 140 days in pre-sentence custody. Mr O'Hanlon-Rose said Henegan's offending was not as serious as the co-accused's, due to him being involved in 24 loans that resulted in Macquarie Bank paying out just over $1m. Henegan was subjected to significant financial and personal pressure at the time due to the combination of writing the letters, her own business experiencing problems and the death of a family member weighing on her. Several references attested to Henegan's good character. She is currently the primary financial and practical carer for her husband, who is awaiting open heart surgery following a heart attack in 2022, Mr O'Hanlon-Rose said. 'She is a woman who has been self-reliant from a very early age,' Mr O'Hanlon-Rose said. 'She's worked hard to achieve success in the financial services industry and her poor decision making has destroyed that work.' Judge Richards took into account Henegan's significant remorse and 'shame', imposing an 18-month sentence, suspended immediately for three years. Error in retrieving data Sign in to access your portfolio Error in retrieving data
News.com.au
08-07-2025
- Business
- News.com.au
Macquarie Bank paid out $729k after ex-broker forged letters for business loans, claimed $68k commission: court
A former financial broker gained $68,000 in commissions by forging tax accountant letters for people who were not entitled to business loans for cars through a major Aussie bank, a court has been told. Charleen Henegan's conduct was undone by her own hand, after she wrote a letter to Macquarie Bank admitting to creating the letters on 18 occasions, allowing several people to obtain business loans they were not entitled to. Macquarie Bank paid out $729,000 as a result, Brisbane District Court was told. In lieu of a jail term, Henegan walked from court on Tuesday with an 18-month suspended sentence, after pleading guilty to a single charge of fraud - dishonestly inducing a person to act. District Court Judge Deborah Richards noted an irony at the heart of Henegan's offending, in that she committed the offence out of significant 'financial pressure' at the time, yet had paid the 'ultimate price … (of) financial ruin'. 'You've lost your finance brokerage, you won't be licensed again,' Judge Richards said. 'There's been a very heavy financial penalty that you've paid for this offending, for not particularly significant reward.' The court was told Henegan's co-accused was a car dealer who set about obtaining business loans from Macquarie Leasing – a subsidiary of the bank – for his prospective customers. In order to secure the business loans, the co-accused inflated the value of the vehicles through a combination of falsifying tax invoices, winding back odometers and instructing 'customers to create ABN numbers' for their loan applications. Henegan became involved as a passive financial broker for these applications, crown prosecutor Rhys Byrne said. 'As part of a business loan application, Macquarie Leasing usually requires a letter from an accountant to confirm the car was being used for business purposes,' Mr Byrne said. Between December 2018 and April 2019, Henegan forged accountant letters on 18 occasions, falsely asserting customers were entitled to a business loan. Mr Byrne said Henegan received $68,000 in brokerage commission as a result. An investigation began in 2019 over the irregularities. Henegan admitted to Macquarie Leasing in a letter that she had used old account letter templates to forge the documents and that she was under financial pressure at the time, Mr Byrne said. Justice Richards questioned this, saying: 'She could have just said no'. She also noted Henegan was not 'entirely ignorant' of what she was doing, saying police found emails on her computer with customer pay slips, demonstrating they were not self-employed or sole traders. 'There was also an email found on your computer from the car company telling you exactly what these false letters should say … that the vehicles would be used predominantly for business … and the tax was up to date,' Judge Richards said. Henegan's barrister Evan O'Hanlon-Rose said the offending was an 'uncharacteristic aberration' in the life of his otherwise law-abiding client. 'The combination of all that was going on in her life at the time led to an impairment of judgment,' he said. The court was told Henegan's co-accused – who was described as the 'driver' of the offending – was sentenced to two years' jail, suspended after 140 days in pre-sentence custody. Mr O'Hanlon-Rose said Henegan's offending was not as serious as the co-accused's, due to him being involved in 24 loans that resulted in Macquarie Bank paying out just over $1m. Henegan was subjected to significant financial and personal pressure at the time due to the combination of writing the letters, her own business experiencing problems and the death of a family member weighing on her. Several references attested to Henegan's good character. She is currently the primary financial and practical carer for her husband, who is awaiting open heart surgery following a heart attack in 2022, Mr O'Hanlon-Rose said. 'She is a woman who has been self-reliant from a very early age,' Mr O'Hanlon-Rose said. 'She's worked hard to achieve success in the financial services industry and her poor decision making has destroyed that work.' Judge Richards took into account Henegan's significant remorse and 'shame', imposing an 18-month sentence, suspended immediately for three years.
